2020 BGSS 3E POA EOY P2 Q2
2 On 15 July 2020, Smart Trading purchased a batch of sandals on credit from an overseas supplier, Fast Walker. The invoiced amount of the purchase was $9,000. The following costs relate to this batch of sandals.
1. Delivery and handling cost for sandals, $500.
2. Insurance for shipment of sandals, $120.
3. Import tax on sandals, $630.
4. Wages for staff to receive and repack sandals, $700.
5. Warehouse rental, $4 000.
6. Wages for salesperson to advertise and sell sandals, $2 900.
REQUIRED
a. Calculate the cost of inventory purchased.
[2]
On 1 August 2020, Smart Trading had 20 units of inventory valued at $6 000. During the month of August, the following cash purchases by cheque took place.
The business records inventory using the First-In-First-Out (FIFO) method.
REQUIRED
b. Calculate the cost of sales for the month of August 2020.
[1]
c. Prepare the inventory account, and bring down the balance to the next month.
[6]
On 30 September 2020, the business had an ending inventory valued at $4 320. Due to flash floods, the packaging of the remaining goods was damaged. The loss amounted to $800.
REQUIRED
d. State the valuation rule for inventory.
[1]
e. Prepare the journal entry to account for the goods destroyed. A narration is not required.
[2]
f. State the effect and the amount affected on the following items for the month of September if the value of the inventory was not adjusted.
[2]
i. expenses
ii. profit
[TOTAL 14]
Cost of inventory purchased = 9 000 + 500 + 120 + 630 + 700
= 10 950
Cost of sales = 6000 + 3500 + 5000
= 14 500